Hi All,
I have a question that I can't seem to find the answer to. I have a RESP account with investment fund that provides the QEF statements. However, the QEF statements don't match the calendar year but rather go from October 1 to September 30.
Does that mean that I can't use those statements and therefore cannot make the QEF election and only make mark-to-market one since when I did the 3520-a and will 3520 it will be for the calendar year. All of my RESP account statements are calendar year based.
Any advice would be appreciated.
PFIC QEF statement question
Moderator: Mark T Serbinski CA CPA
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victoriaguy
- Posts: 54
- Joined: Sun Oct 26, 2014 12:03 am
- Location: Victoria, BC, Canada
I would suspect that you would do the 3520A form specifying the fiscal year of the trust (Oct to Sep). The 3520A would be completed by the trust in a perfect world, but most don't, so the instructions ask you to fill 3520A out best you can. So I would fill it out with the fiscal year of the trust, and fill 3520 out with the calendar year.
The only question that is left for me is whether to report all the income I got for the whole year. In the absence of any further guidance, I would declare the income for the calendar year on my tax return, not the income from the 3520A, and I would attach a note explaining my choice. If you phone the Int'l tax hotline, they'll tell you to hire an accountant.
(Notice you don't actually specify your income from the trust anywhere on 3520, other than attaching the Beneficiary Statement from the 3520A. But I'd attach a note as I explained, unless I could get advice from an accountant otherwise. If you don't the IRS could always say you underreported income for the year. So it just seems like the safest option to me.
The only question that is left for me is whether to report all the income I got for the whole year. In the absence of any further guidance, I would declare the income for the calendar year on my tax return, not the income from the 3520A, and I would attach a note explaining my choice. If you phone the Int'l tax hotline, they'll tell you to hire an accountant.
(Notice you don't actually specify your income from the trust anywhere on 3520, other than attaching the Beneficiary Statement from the 3520A. But I'd attach a note as I explained, unless I could get advice from an accountant otherwise. If you don't the IRS could always say you underreported income for the year. So it just seems like the safest option to me.
Hello,
You can use the QEF statements - the tax year does not need to line up.
You need to make your ordinary income and net gain calculations based on the units of the fund you owned during the fund's tax year.
In your case, the fund's tax year is from Oct 1- sept 30.
If you bought 100 units on Jan 1 2016, and held them all year, you would use:
QEF statement data x 100 x 272 days (9 months)
Cheers!
You can use the QEF statements - the tax year does not need to line up.
You need to make your ordinary income and net gain calculations based on the units of the fund you owned during the fund's tax year.
In your case, the fund's tax year is from Oct 1- sept 30.
If you bought 100 units on Jan 1 2016, and held them all year, you would use:
QEF statement data x 100 x 272 days (9 months)
Cheers!
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MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.
Hi MGeorge,
Thanks for the answer.
My question then is if I use the QEF data that only accounts for 272 days. What about the value for the rest of the year? I held the funds the entire year of 2016 and my 3520-a was filed for the entire calendar year of 2016. My RESP statement is clearly going from Jan 1 to Dec 31 which follows a calendar year.
Can you please explain about the missing 3 months of 2016?
The bottom line is that I know exactly how much money I made in the RESP for 2016 from the statement that I have. There is dividends, interest and unrealized capital gains.
Hope I'm making sense on this. Again, thanks for any help!
Thanks for the answer.
My question then is if I use the QEF data that only accounts for 272 days. What about the value for the rest of the year? I held the funds the entire year of 2016 and my 3520-a was filed for the entire calendar year of 2016. My RESP statement is clearly going from Jan 1 to Dec 31 which follows a calendar year.
Can you please explain about the missing 3 months of 2016?
The bottom line is that I know exactly how much money I made in the RESP for 2016 from the statement that I have. There is dividends, interest and unrealized capital gains.
Hope I'm making sense on this. Again, thanks for any help!
Hi puzon23,
This is a tricky one - the interaction with QEF statements and 3520s.
If you look at the internal revenue code section 1293 - from a tax liability perspective, you are completely off the hook for declaring the "actual" distributions from a PFIC with a QEF election in place. Simply put, in the income statement for your 3520A, you can list the QEF inclusions (ordinary earnings) as "other" and say it is section 1293 income. The net capital gain QEF income would fit under capital gain.
The valuation needed at the end of the year is the Dec 31 value in USD.
If the fund distributes a pile of cash on Dec 15th, you can ignore it on your 3520A, and your 1040 because you have a QEF election in place, and you're only required to report the QEF amounts. (note that the actual distributions will reduce your cost basis in the fund for US tax purposes).
A word of caution though; if you had sold the fund on Dec 31, 2016, then on your 1040 and 3520A for 2017, you would have to include the QEF income from the period of Oct 1 to Dec 31 using the 2017 QEF statement. Even though you haven't held the fund in 2017.
I hope this helps, and makes sense.
This is a tricky one - the interaction with QEF statements and 3520s.
If you look at the internal revenue code section 1293 - from a tax liability perspective, you are completely off the hook for declaring the "actual" distributions from a PFIC with a QEF election in place. Simply put, in the income statement for your 3520A, you can list the QEF inclusions (ordinary earnings) as "other" and say it is section 1293 income. The net capital gain QEF income would fit under capital gain.
The valuation needed at the end of the year is the Dec 31 value in USD.
If the fund distributes a pile of cash on Dec 15th, you can ignore it on your 3520A, and your 1040 because you have a QEF election in place, and you're only required to report the QEF amounts. (note that the actual distributions will reduce your cost basis in the fund for US tax purposes).
A word of caution though; if you had sold the fund on Dec 31, 2016, then on your 1040 and 3520A for 2017, you would have to include the QEF income from the period of Oct 1 to Dec 31 using the 2017 QEF statement. Even though you haven't held the fund in 2017.
I hope this helps, and makes sense.
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MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.
"My question then is if I use the QEF data that only accounts for 272 days. What about the value for the rest of the year? I held the funds the entire year of 2016 * * * Can you please explain about the missing 3 months of 2016?"
You compute the QEF inclusion based on your days of ownership during the PFIC's year. If the PFIC's year is from October 1, 2015 to September 30, 2016 and you owned the PFIC shares for all 365 days during the PFIC's year, you would compute your pro rata share based on 365 days.
You compute the QEF inclusion based on your days of ownership during the PFIC's year. If the PFIC's year is from October 1, 2015 to September 30, 2016 and you owned the PFIC shares for all 365 days during the PFIC's year, you would compute your pro rata share based on 365 days.
Hi puzon,
It sounds like I might be missing something. I've reread the thread - so you are planning on using Jan 1-Dec 31 for the 3520A reporting. Just to make sure I understand - Is 2016 the first year you are making a QEF election?
When did you acquire the funds - was it before Oct 1, 2015?
It sounds like I might be missing something. I've reread the thread - so you are planning on using Jan 1-Dec 31 for the 3520A reporting. Just to make sure I understand - Is 2016 the first year you are making a QEF election?
When did you acquire the funds - was it before Oct 1, 2015?
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MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.